Independent Sector

Statement of Values and Code of Ethics for Nonprofit and Philanthropic Organizations

Approved by the Independent Sector Board of Directors on January 29, 2004

I. Introduction

As a matter of fundamental principle, the nonprofit and philanthropic community should adhere to the highest ethical standards because it is the right thing to do. As a matter of pragmatic self-interest, the community should do so because public trust in our performance is the bedrock of our legitimacy. Donors and volunteers support charitable organizations because they trust them to carry out their missions, to be good stewards of their resources, and to uphold rigorous standards of conduct.

Nonprofit and philanthropic organizations must earn this trust every day and in every possible way. But organizations are, at base, people, and it is up to the people of the independent sector_board members, executive leaders, staff and volunteers_to demonstrate their ongoing commitment to the core values of integrity, honesty, fairness, openness, respect, and responsibility.

The independent sector comprises a diverse array of organizations large and small, those that make grants and those that raise funds from the public, those that operate at the community and national level and those that work outside the United States. That diversity is one of the abiding strengths of our sector. Undergirding this diversity, however, must be a common set of ethical standards.

Each organization in the independent sector should have a formally adopted code of ethics with which all of their trustees, staff and volunteers are familiar and to which they adhere. This Statement of Values and Code of Ethics for Nonprofit and Philanthropic Organizations provides a starting point for organizations to use in developing their own codes with their own constituencies.

Adherence to the law is the minimum standard of expected behavior. Nonprofit and philanthropic organizations must do more, however, than simply obey the law. We must embrace the spirit of the law, often going beyond legal requirements and making sure that what we do is matched by what the public understands about what we do. Transparency, openness and responsiveness to public concerns must be integral to our behavior.

II. Statement of Values

Any code of ethics is built on a foundation of widely shared values. The values of the independent sector include:

• Commitment to the public good;
• Accountability to the public;
• Commitment beyond the law;
• Respect for the worth and dignity of individuals;
• Inclusiveness and social justice;
• Respect for pluralism and diversity
• Transparency, integrity and honesty;
• Responsible stewardship of resources; and,
• Commitment to excellence and to maintaining the public trust.

These values lead directly to the Code of Ethics for Nonprofit and Philanthropic Organizations that follows. The values inform and guide the actions that organizations should take in developing their policies and informing their practices.

III. The Code of Ethics for Nonprofit and Philanthropic Organizations

A. Personal and Professional Integrity

All staff, board members and volunteers of the organization act with honesty, integrity and openness in all their dealings as representatives of the organization. The organization promotes a working environment that values respect, fairness and integrity.

B. Mission

The organization has a clearly stated mission and purpose, approved by the board of directors, in pursuit of the public good. All of its programs support that mission and all who work for or on behalf of the organization understand and are loyal to that mission and purpose. The mission is responsive to the constituency and communities served by the organization and of value to the society at large.

C. Governance

The organization has an active governing body that is responsible for setting the mission and strategic direction of the organization and oversight of the finances, operations, and policies of the organization. The governing body:

• Ensures that its board members or trustees have the requisite skills and experience to carry out their duties and that all members understand and fulfill their governance duties acting for the benefit of the organization and its public purpose;
• Has a conflict of interest policy that ensures that any conflicts of interest or the appearance thereof are avoided or appropriately managed through disclosure, recusal or other means; and
• Is responsible for the hiring, firing, and regular review of the performance of the chief executive officer, and ensures that the compensation of the chief executive officer is reasonable and appropriate;
• Ensures that the CEO and appropriate staff provide the governing body with timely and comprehensive information so that the governing body can effectively carry out its duties;
• Ensures that the organization conducts all transactions and dealings with integrity and honesty;
• Ensures that the organization promotes working relationships with board members, staff, volunteers, and program beneficiaries that are based on mutual respect, fairness and openness;
• Ensures that the organization is fair and inclusive in its hiring and promotion policies and practices for all board, staff and volunteer positions;
• Ensures that policies of the organization are in writing, clearly articulated and officially adopted;
• Ensures that the resources of the organization are responsibly and prudently managed; and,
• Ensures that the organization has the capacity to carry out its programs effectively.

D. Legal Compliance

The organization is knowledgeable of and complies with all laws, regulations and applicable international conventions.

E. Responsible Stewardship

The organization and its subsidiaries manage their funds responsibly and prudently. This should include the following considerations:

• It spends a reasonable percentage of its annual budget on programs in pursuance of its mission;
• It spends an adequate amount on administrative expenses to ensure effective accounting systems, internal controls, competent staff, and other expenditures critical to professional management;
• The organization compensates staff, and any others who may receive compensation, reasonably and appropriately;
• Organizations that solicit funds have reasonable fundraising costs, recognizing the variety of factors that affect fundraising costs;
• Organizations do not accumulate operating funds excessively;
• Organizations with endowments (both foundations and public charities) prudently draw from endowment funds consistent with donor intent and to support the public purpose of the organization;
• Organizations ensure that all spending practices and policies are fair, reasonable and appropriate to fulfill the mission of the organization; and,
• All financial reports are factually accurate and complete in all material respects.

F. Openness and Disclosure

The organization provides comprehensive and timely information to the public, the media, and all stakeholders and is responsive in a timely manner to reasonable requests for information. All information about the organization will fully and honestly reflect the policies and practices of the organization. Basic informational data about the organization, such as the Form 990, reviews and compilations, and audited financial statements will be posted on the organization's website or otherwise available to the public. All solicitation materials accurately represent the organization's policies and practices and will reflect the dignity of program beneficiaries. All financial, organizational, and program reports will be complete and accurate in all material respects.

G. Program Evaluation

The organization regularly reviews program effectiveness and has mechanisms to incorporate lessons learned into future programs. The organization is committed to improving program and organizational effectiveness and develops mechanisms to promote learning from its activities and the field. The organization is responsive to changes in its field of activity and is responsive to the needs of its constituencies.

H. Inclusiveness and Diversity

The organization has a policy of promoting inclusiveness and its staff, board and volunteers reflect diversity in order to enrich its programmatic effectiveness. The organization takes meaningful steps to promote inclusiveness in its hiring, retention, promotion, board recruitment and constituencies served.

I. Fundraising

Organizations that raise funds from the public or from donor institutions are truthful in their solicitation materials. Organizations respect the privacy concerns of individual donors and expend funds consistent with donor intent. Organizations disclose important and relevant information to potential donors.

In raising funds from the public, organizations will respect the rights of donors, as follows:

• To be informed of the mission of the organization, the way the resources will be used and their capacity to use donations effectively for their intended purposes;
• To be informed of the identity of those serving on the organization's governing board and to expect the board to exercise prudent judgment in its stewardship responsibilities;
• To have access to the organization's most recent financial reports;
• To be assured their gifts will be used for the purposes for which they were given;
• To receive appropriate acknowledgement and recognition;
• To be assured that information about their donations is handled with respect and with confidentiality to the extent provided by the law;
• To expect that all relationships with individuals representing organizations of interest to the donor will be professional in nature;
• To be informed whether those seeking donations are volunteers, employees of the organizations or hired solicitors;
• To have the opportunity for their names to be deleted from mailing lists that an organization may intend to share; and,
• To feel free to ask questions when making a donation and to receive prompt, truthful and forthright answers.

J. Grantmaker Guidelines

Organizations that are grantmakers have particular responsibilities in carrying out their missions.4 These include the following:

• They will have constructive relations with grantseekers based on mutual respect and shared goals;
• They will communicate clearly and on a timely basis with potential grantees;
• They will treat grantseekers and grantees fairly and with respect;
• They will respect the expertise of grantseekers in their fields of knowledge;
• They will seek to understand and respect the organizational capacity and needs of grantseeking organizations; and,
• They will respect the integrity of the mission of grantseeking organizations